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Can Paying ‘Too Much’ or ‘Too Little’ Tax Contribute to Forced CEO Turnover?

57 Pages Posted: 23 Oct 2015 Last revised: 7 May 2017

James Chyz

University of Tennessee

Fabio B. Gaertner

University of Wisconsin - Madison - Department of Accounting and Information Systems

Date Written: November 26, 2016

Abstract

Our study examines the effect of corporate tax outcomes on forced CEO turnover. While prior research argues that firms often do not engage in tax avoidance due to reputational concerns, the empirical evidence suggesting the existence of reputational costs is scarce. In a broad sample of firms, we find evidence of a relation between the payment of low taxes and forced turnover. We also find that forced CEO turnover is more likely when the firm pays a high tax rate. Our results are consistent with the existence of previously unexplored individual reputational costs for not engaging in tax avoidance.

Keywords: CEO turnover, tax avoidance

JEL Classification: M40, H25

Suggested Citation

Chyz, James and Gaertner, Fabio B., Can Paying ‘Too Much’ or ‘Too Little’ Tax Contribute to Forced CEO Turnover? (November 26, 2016). The Accounting Review, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2678836 or http://dx.doi.org/10.2139/ssrn.2678836

James Chyz

University of Tennessee ( email )

Knoxville, TN
United States
865-974-1701 (Phone)

Fabio B. Gaertner (Contact Author)

University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )

School of Business
975 University Avenue
Madison, WI 53706
United States

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